Friday, 30 November 2018

Ben Swann gives us the latest on his new project Isegoria and how crypto currency especially Dash and Smart-Cash have given him the freedom to truly be an independent journalist. Recorded at World Crypto Con in Las Vegas.Then from Money2020 we talk with Bradley Zastrow a former American Express Exec turned Crypto Exec with Dash Core Group. Robin O'Connell VP of Uphold also sit's in on the conversation to discuss Uphold's new partnership with Dash as well as Upholds presence around the world.Finally we talk with Bryan Courchesne from DAIM, Digital Assets Investment Management about their investment services.

In what may well have been the most watched cryptocurrency event of 2018, Bitcoin Cash two weeks ago “hard forked” (split) into two different coins. The “big block” project that itself forked away from the Bitcoin blockchain in August 2017 fragmented into “Bitcoin Cash ABC” (BCHABC) and “Bitcoin Cash SV” (BCHSV).

In this third and final overview: the main takeaways and latest developments of the second week since the Bitcoin Cash split.

Hash War Over

The Bitcoin Cash split drew as much attention as it did in part because Bitcoin SV proponents had announced a “hash war.” Where previous “coin splits” were relatively peaceful — both sides of the respective disputes went their own way — nChain chief scientist and Bitcoin SV frontman Craig Steven Wright threatened that miners would 51% attack a potential Bitcoin Cash ABC chain out of existence.

But as the coin forked and the world watched, nothing irregular happened. Possibly because Bitcoin Cash proponents brought in additional hash power to secure their side of the chain, no 51% attack took place.

One day after the split, Wright said Bitcoin Cash SV miners would instead maintain an “endurance attack.” If and when more miners left the Bitcoin Cash ABC network, the 51% attack(s) would commence. For well over a week, both chains did attract more hash power than their respective block rewards warranted, suggesting that miners were losing millions of dollars in a seemingly pointless “hash power race.”

However, by the beginning of this week — some 10 days after the split — CoinGeek published a press release announcing support for a permanent split. As the publication is owned by online gambling tycoon and major Bitcoin SV miner Calvin Ayre, this declaration was considered an “official” end to the hash war.

Technical director of the Bitcoin SV project Steve Shadders even committed to implementing replay protection (ensuring that users don’t accidentally spend coins on both chains), while Ayre acknowledged he would let go of the name “Bitcoin Cash” and ticker “BCH” and instead adopt “Bitcoin SV” and “BSV.” Hash power on both coins has dropped significantly since (with Bitcoin Cash ABC still ahead).

The two coins will now compete with one another and the market, as all cryptocurrencies do.

Wright and Ayre

Both Wright and Ayre took the stage at the CoinGeek Week Conference in London this week. Here, Wright proposed a plan to transform the internet through Bitcoin SV, while Ayre emphasized in interviews that he believes Bitcoin SV is the “original Bitcoin.”

Perhaps more noteworthy, on Friday Satoshi Nakamoto’s old P2P Foundation account curiously became active again. The account followed a person named “Wagner Tamanaha” and posted a mysterious message: “nour” which, according to Google Translate, is Arabic for “light.”

Also worth noting is that Ayre had announced last week that he would reveal documents to prove market manipulation which would involve several prominent names in the Bitcoin Cash ABC camp: bitcoin.com CEO Roger Ver, Bitmain co-founder Jihan Wu, Bitcoin ABC lead developer Amaury Séchet and Kraken CEO Jesse Powell. At the time of writing this article, no documents have been revealed, however, and since CoinGeek Week is over it seems unlikely any will be.

At the tail end of the week, Ayre’s CoinGeek did announce it will be acquired by Squire Mining Ltd.

Settling In

It is clear by now that both sides of the Bitcoin Cash split will continue as their own cryptocurrencies with their own communities.

Shortly after the split, there was disagreement on the names for the two projects. To some extent there still is, but the projects themselves and most of the industry are now settling on “Bitcoin Cash” and “BCH” for the Bitcoin Cash ABC side of the split, and “Bitcoin SV” and “BSV” for the Bitcoin Cash SV side.

So far, Bitcoin Cash ABC has made it through the split more successfully than Bitcoin SV. Most companies that offered Bitcoin Cash services before the split now offer Bitcoin Cash ABC as “Bitcoin Cash.” A notable exception is blogging platform Yours, which moved to Bitcoin Cash SV. Several of the cryptocurrency exchanges that offered BCH trading now offer both under various tickers.

BCHABC is also doing better price-wise. In the second week after the split, it mostly traded between $150 and $200. BCHSV was trading lower, between $75 and $100 — though that is a lot higher than during the first week after the split. As such, the price difference between the two coins has shrunk.

This week, Bitcoin SV made its “official” debut on coin-ranking sites like CoinMarketCap, entering the charts as a top-10 coin. At the time of writing, BCHSV holds ninth position, but it briefly peaked to seventh. BCHABC, meanwhile, had difficulty maintaining the fourth position that Bitcoin Cash used to occupy; at the time of writing, it has dropped to the fifth spot.

Perhaps a noteworthy hiccup, cryptocurrency exchange Poloniex experienced withdrawal issues with BCHABC and BCHSV. It’s unclear what caused the issues, and they were resolved within a day or two.

And, as one last interesting detail, MMA fighter Rory MacDonald tweeted to his 235,000 followers that “bitcoin SV is bitcoin.”

Having met the U.S. Securities and Exchange Commission (SEC) in August 2018, officials of VanEck, SolidX and Cboe BZX Exchange have met with the Commission again, in the latest attempt to convince the regulator to approve the nation's first bitcoin exchange-traded fund (ETF), according to an official presentation submitted to the SEC.

The firms gave the pitch to the SEC's Division of Corporation Finance, Division of Trading and Markets, and Office of General Counsel.

The presentation given to staffers of the agency was focused on comparing the cryptocurrency market to other markets that already have exchange-traded funds, including silver and gold markets. The promoters of the VanEck/SolidX ETF hammered on its long-held view — that the bitcoin market is ready for an ETF.

Using the vector error-correction (VEC) model to compare pricing data between exchanges over an extended period of time, the proponents argued that bitcoin’s price between the futures market and the spot market are connected. They then compared these price correlations to the markets for commodities like gold and silver, which also function as money substitutes to indicate that bitcoin features a "well-functioning capital market."

"The empirical evidence indicates that the spot and futures prices are cointegrated. This indicates that the spot and futures prices are tightly linked."

On the issue of market manipulation, one issue that the SEC has continued to point to in a number of ETF rejections this year, the firms argue that the market is more resilient than the regulators give it credit for.

"Several properties of bitcoin and the underlying ecosystem make it less susceptible to manipulation than other commodities that underlie already approved ETPs."

For most commodities, insiders might trade on information related to production or the "discovery of new sources of supply" of the product which could impact its price. With bitcoin, this is impossible as the inflation rate is fixed and transparent.

For this to be remotely possible, the "manipulation of the price of bitcoin on any single venue would require manipulation of the global bitcoin price to be effective."

Arbitrageurs would need to have funds distributed on crypto exchanges to have any chance of profiting from "temporary price dislocations."

This year, the SEC has rejected most of the ETF proposals that crossed its desk. While some were rejected outright, nine others are being reviewed by the Commission. The VanEck/SolidX proposal is the last horse in the race with many believing it’s a matter of “when” not “if” it would be approved.

“We’ll continue to engage and fight this fight to do our part as an asset manager to help the digital asset space mature. So it may not be a short fight — I don’t know,” Gabor Gurbacs, director of Digital Asset Strategy at VanEck/MVIS, said in an earlier interview with Bitcoin Magazine. “But we have done this with gold in the ’60s, and hopefully now, we’re building the right basis that will stay true to bitcoin as well as integrate it into the U.S. capital markets.”

Reggie Browne, senior managing director of the ETF group at Cantor Fitzgerald, said a bitcoin exchange-traded fund would be approved "no time soon," adding:

"It's very difficult for the [Securities and Exchange Commission (SEC)] to wrap their heads around a positive approval because there's no data yet ... the markets just aren't here."

On November 27, 2018, a California judge turned back the SEC’s request for an injunction against token company BlockVest, a company the U.S. Securities and Exchange Commission (SEC) is pursuing for allegedly conducting an unregistered securities offering. The judge, however, ruled that BlockVest’s token distribution, which was conducted via airdrop, was given freely and received without expectation for returns, so it didn’t constitute an investment contract.

While the judge’s ruling is not a law-binding verdict, it was still a victory for BlockVest and the wider ICO industry, something that’s been a rarity for the SEC’s mounting list of token sale targets.

Among other regulatory developments, 2018 has been one extended game of cat and mouse between the U.S. Securities and Exchange Commission and any number of initial coin offerings (ICO) that have sprung up in the investing exuberance of 2017’s bull market. And the SEC has been catching its fair share of mice.

Back in last year’s unprecedented boom, which saw the crypto market’s assets increase threefold, many ICOs attempted to evade the SEC’s scrutiny by self-labeling their products as utility tokens. If they could prove their tokens were built to serve a function rather than exist as an investment vehicle, then they could avoid a securities classification and continue their sale without registering with the SEC.

The SEC, though, didn’t buy the distinction.

So far this year, the SEC has come out hard against a handful of ICOs, broker dealers, funds and even an exchange, slapping them with fines for acting as unregistered entities. As though a symbolic culmination of its enforcement actions this year, the SEC’s most recent and damning charge was leveraged against EtherDelta, one of the space’s most popular decentralized exchanges that houses many Ethereum tokens whose ICOs the SEC views as securities offerings.

A New Phase of Enforcement

In correspondence with Bitcoin Magazine, Jake Chervinsky, an associate at Kobre & Kim law firm, explained that he believes the SEC established a baseline of enforcement in 2018, one that sets a precedent for how the agency views the burgeoning ecosystem of token offerings.

“I think ‘phase one’ saw the SEC establish its fundamental views on the legality of common issues in the crypto industry by prosecuting a small number of companies and individuals from various industry segments, including ICO issuers, exchanges, broker-dealers, and token funds. The SEC’s goal was to put everyone on notice that their conduct may be illegal — for example, it’s clear that the SEC views all ICOs conducted in the United States as unregistered securities issuances in violation of the 1933 Act.”

Chervinsky originally posited his theory on the SEC’s enforcement phases in a Twitter thread this November. In the thread, he suggested that 2019 will see phase two; in our conversation, he explained that the SEC is operating under the unspoken expectation that token projects will have to work with the agency to operate legally, as 2018’s enforcement examples have done all the talking for them.

“In ‘phase two,’ the SEC expects everyone in the industry to come forward voluntarily and work with the SEC to make sure they’re in compliance with the securities laws. As SEC Chairman Jay Clayton said to crypto companies during Consensus: Invest 2018: ‘Get your act together!’”

For those that fail to acquiesce, Chervinsky anticipates that they could be made examples of still.

“The SEC will likely prosecute companies that refuse to comply voluntarily. In the end, the SEC’s goal will be to bring the entire industry into compliance with the securities laws, even if that means dozens or hundreds of different companies.”

Basically, the SEC’s rationale is that token companies have no excuse not to register with the agency. They should operate under the assumption that they’ll be treated like a security, unless they can prove otherwise. But the onus is on the company to show why they don’t fit the mold, and simply calling their offering a utility token doesn’t cut it.

Moreover, these token companies have a library of enforcements and charges to consult when in doubt over their securities status. Chervinsky calls this “guidance by enforcement,” an old dog’s trick that the SEC has used in the past. For this new industry, Chervinsky believes that the SEC went after the easiest targets to set firm examples at the outset.

“They chose the ones that they did simply because they were the easiest for the SEC to resolve quickly and efficiently, and the factual allegations in these public cases made for useful guidance for the rest of the industry.”

These examples set a loose standard for token projects going into 2019 “for other crypto industry stakeholders to negotiate their own settlements,” Chervinsky holds. But he cautioned that “these orders are not binding precedent.”

Indeed, in his Twitter thread, Chervinsky elaborates that, for the SEC, the more nebulous the guidance the better. If the SEC plays it loose, then they get to set the rules on their own terms and exercise enforcement at their discretion. Most of these cases, he explains, are settled privately, and the SEC would rather avoid open litigation, as a few court rulings could lead to legal precedents that would lock the SEC’s jurisdiction in rigid, codified confines.

As Enforcement Ramps Up, Guidance Plays Catch Up

Still, Chervinsky expects “that the SEC will provide additional guidance as time goes on, likely through FinHub and ‘crypto czar’ Valerie Szczepanik” — though he’s also certain that the SEC shouldn’t have to hold the guiding torch of regulation alone. The U.S.’s legislature, he says, needs to do its own part to effect the proper legislative changes that would allow regulations, and by proxy, the entities they regulate, to operate more organically within a more mature system.

“I think Congress can — and eventually will need to — do more to clarify how the federal securities laws apply to digital assets. The foundation of the securities laws dates back to the 1930s, long before anyone could have imagined the concept of a digital asset issued via the internet through the use of blockchain technology. This old legal framework simply wasn’t designed for the digital age, and as a result, it doesn’t provide the regulatory clarity that the crypto industry needs to move forward.”

So far, there have been very few benchmarks for moving regulation forward: the Howey Test, a metric to measure whether or not an asset is a security as defined by the Securities Act of 1933; the DAO Report, a report released by the SEC after the DAO hack in 2016; prior enforcement actions; and, most recently, the SEC’s Statement on Digital Asset Securities Issuance and Trading (something that Chervinsky said “reads like a comprehensive primer on the types of securities violations that the SEC wants to resolve in the industry”).

Much like the outdated Securities Act, Chervinsky finds that these various references for guidance are not robust enough to substantiate actual regulation and satisfy the industry’s need for clarity. And even though he thinks Congress should be bringing more to the table than it has already, the SEC should also be doing more to help the industry.

“The SEC can and should do a lot more than regulate by enforcement. The SEC could issue informal guidance explaining its position on the many outstanding questions facing the crypto industry, such as when a token transforms from a security to a non-security, or how a company can conduct an ICO outside U.S. borders without implicating the SEC’s jurisdiction. The SEC could also pursue official rulemaking to formalize its positions on digital assets. This would result in enforceable rules — like Regulation D for private placements or Regulation S for offshore securities issuances — that the crypto industry could rely on moving forward.”

He added:

“... Similarly the securities laws are unclear as to whether the SEC has jurisdiction over cryptocurrency exchanges and initial coin offerings located physically outside U.S. borders. Given that the SEC doesn’t appear likely to provide any additional clarity on these issues, the burden may fall to Congress to step in and take action.”

Heading Into a New Year, the Industry Has More Questions Than Answers

Other legal experts agree with Chervinsky that the SEC, in a way, has left investors hanging with its sluggish regulatory action that is punctuated with hard-hitting regulatory charges. Some have even said that the new Statement on Digital Asset Securities Issuance and Trading lays a minefield for the digital asset industry and those launching companies to curate it.

Less a minefield and more a labyrinth, Chervinsky believes that some of the SEC’s other guidance, like the clarification that ether, while sold as a security, has decentralized to the point of not being one, could construct a maze of confusion over what counts as fully decentralized — and how a token company is supposed to get there in the first place.

Chervinsky notes that “in July, the SEC suggested that a digital asset could start life as a security and then evolve into a non-security once it becomes ‘sufficiently decentralized,’ but the law doesn’t contemplate such a transformation.”

Even so, with its prosecution of ICOs, broker dealers, funds and now an exchange in EtherDelta, Chervinsky believes that the SEC has “made an example of at least one target in each of the key segments of the crypto industry.”

The only piece missing, he believes, are the traders — those who engage in “acts of market manipulation, including pump and dump schemes, wash trading, spoofing, and outright fraud.” He believes the SEC hasn’t gone after these actors because of insufficient market data but that they’ll be in the agency’s crosshairs soon enough. (If you read this and your heart skipped a beat, don’t worry; he’s talking about traders who actively commit market manipulation and fraud, not everyday, Dick and Jane traders).

With all the pieces in place, Chervinsky expects 2019 to be somewhat of an open season for the SEC for those who decide to shirk their regulatory responsibilities. But that doesn’t mean that every shot will be a killshot. With each successive enforcement, more questions will be opened and more avenues of interpretation traversed.

In Chervinsky’s opinion, resolution on these fronts will be a slow, painful march marked by a combination of legal battles and molasses-paced legislative drafting.

“The crypto industry won’t have a firm standard for what conduct is allowed and what’s illegal until Congress passes new legislation or the SEC’s theories are tested in court.”

Some of these standards are in the making, as the recent court action in California surrounding BlockVest suggests. As for the rest, the industry will have to hunker down and withstand the brunt of what’s become a slow, blow-after-blow exchange with an evolving regulatory landscape. But, so long as it can take note of where the bruising has set in, these blows should become less damaging (and less frequent) over time.

Blockchain Payroll Platform WorkChain.io has partnered with tokenization platform STASIS to enable euro-backed crypto paychecks for its European Union (EU) users with the EURS stablecoin.

EURS becomes the second stablecoin selected for use on the WorkChain.io platform but the first one collateralized in euros. The platform also supports TrustToken's TrueUSD stablecoin, which is a fiat-collateralized stablecoin pegged to the U.S. dollar.

Speaking with Bitcoin Magazine, WorkChain.io CEO Ryan Fyfe said the inclusion of EURS payment on the platform means "anyone who gets paid in Euros can now choose to get their paycheck in cryptocurrency. And, being a stablecoin, it protects workers and employers from volatility. With the volatility of the cryptocurrency market in recent days, the need for stablecoins has become even more apparent."

WorkChain seems to be entirely different from a host of blockchain-based payroll services like Bitwage, the U.S.-based payroll and wage payment platform. Whereas Bitwage offers the typical payroll model with an option to convert monthly payments into bitcoin or ether, WorkChain disrupts the pay period, allowing workers to choose when they want to get paid and in which currency.

"So, instead of waiting weeks or up to a month to get their paycheck, workers can choose when their payday comes — every day if they want. It’s their paycheck on demand. This gives people more financial control: If you can get your earnings as soon as you earn them, there’s no more putting things like bills and rent off until next payday."

The EURS is a fiat-collateralized stablecoin created by Malta-based STASIS in July 2018 with a $100 million pre-launch order book; it aims to be the largest fully "verified and collateralized" stablecoin in the world.

Gregory Klumov, CEO of STASIS, echoed Fyfe's sentiments in the release, arguing that making salaries available in EURS extends the practical use of stablecoins "beyond cryptocurrency trading and into the everyday financial lives of regular people.”

WorkChain.io is a blockchain-based payroll company that allows for instant payout to employees in crypto. Initially designed for salaried workers, employers can connect their payroll with WorkChain's platform using the company's wallet app, which creates a payroll smart contract to execute payments to employees.

At the moment, WorkChain.io's mobile wallet has a few missing parts, but Fyfe promises significant upgrades in the ensuing months.

Additional wallet functionality will include users being able to choose to withdraw their cryptocurrency earnings to their bank account or credit card, transfer to any major exchange, spend directly, or save on the WorkChain.io platform, he noted.

On November 27, 2018, a California judge turned back the SEC’s request for an injunction against token company BlockVest, a company the U.S. Securities and Exchange Commission (SEC) is pursuing for allegedly conducting an unregistered securities offering. The judge, however, ruled that BlockVest’s token distribution, which was conducted via airdrop, was given freely and received without expectation for returns, so it didn’t constitute an investment contract.

While the judge’s ruling is not a law-binding verdict, it was still a victory for BlockVest and the wider ICO industry, something that’s been a rarity for the SEC’s mounting list of token sale targets.

Among other regulatory developments, 2018 has been one extended game of cat and mouse between the U.S. Securities and Exchange Commission and any number of initial coin offerings (ICO) that have sprung up in the investing exuberance of 2017’s bull market. And the SEC has been catching its fair share of mice.

Back in last year’s unprecedented boom, which saw the crypto market’s assets increase threefold, many ICOs attempted to evade the SEC’s scrutiny by self-labeling their products as utility tokens. If they could prove their tokens were built to serve a function rather than exist as an investment vehicle, then they could avoid a securities classification and continue their sale without registering with the SEC.

The SEC, though, didn’t buy the distinction.

So far this year, the SEC has come out hard against a handful of ICOs, broker dealers, funds and even an exchange, slapping them with fines for acting as unregistered entities. As though a symbolic culmination of its enforcement actions this year, the SEC’s most recent and damning charge was leveraged against EtherDelta, one of the space’s most popular decentralized exchanges that houses many Ethereum tokens whose ICOs the SEC views as securities offerings.

A New Phase of Enforcement

In correspondence with Bitcoin Magazine, Jake Chervinsky, an associate at Kobre & Kim law firm, explained that he believes the SEC established a baseline of enforcement in 2018, one that sets a precedent for how the agency views the burgeoning ecosystem of token offerings.

“I think ‘phase one’ saw the SEC establish its fundamental views on the legality of common issues in the crypto industry by prosecuting a small number of companies and individuals from various industry segments, including ICO issuers, exchanges, broker-dealers, and token funds. The SEC’s goal was to put everyone on notice that their conduct may be illegal — for example, it’s clear that the SEC views all ICOs conducted in the United States as unregistered securities issuances in violation of the 1933 Act.”

Chervinsky originally posited his theory on the SEC’s enforcement phases in a Twitter thread this November. In the thread, he suggested that 2019 will see phase two; in our conversation, he explained that the SEC is operating under the unspoken expectation that token projects will have to work with the agency to operate legally, as 2018’s enforcement examples have done all the talking for them.

“In ‘phase two,’ the SEC expects everyone in the industry to come forward voluntarily and work with the SEC to make sure they’re in compliance with the securities laws. As SEC Chairman Jay Clayton said to crypto companies during Consensus: Invest 2018: ‘Get your act together!’”

For those that fail to acquiesce, Chervinsky anticipates that they could be made examples of still.

“The SEC will likely prosecute companies that refuse to comply voluntarily. In the end, the SEC’s goal will be to bring the entire industry into compliance with the securities laws, even if that means dozens or hundreds of different companies.”

Basically, the SEC’s rationale is that token companies have no excuse not to register with the agency. They should operate under the assumption that they’ll be treated like a security, unless they can prove otherwise. But the onus is on the company to show why they don’t fit the mold, and simply calling their offering a utility token doesn’t cut it.

Moreover, these token companies have a library of enforcements and charges to consult when in doubt over their securities status. Chervinsky calls this “guidance by enforcement,” an old dog’s trick that the SEC has used in the past. For this new industry, Chervinsky believes that the SEC went after the easiest targets to set firm examples at the outset.

“They chose the ones that they did simply because they were the easiest for the SEC to resolve quickly and efficiently, and the factual allegations in these public cases made for useful guidance for the rest of the industry.”

These examples set a loose standard for token projects going into 2019 “for other crypto industry stakeholders to negotiate their own settlements,” Chervinsky holds. But he cautioned that “these orders are not binding precedent.”

Indeed, in his Twitter thread, Chervinsky elaborates that, for the SEC, the more nebulous the guidance the better. If the SEC plays it loose, then they get to set the rules on their own terms and exercise enforcement at their discretion. Most of these cases, he explains, are settled privately, and the SEC would rather avoid open litigation, as a few court rulings could lead to legal precedents that would lock the SEC’s jurisdiction in rigid, codified confines.

As Enforcement Ramps Up, Guidance Plays Catch Up

Still, Chervinsky expects “that the SEC will provide additional guidance as time goes on, likely through FinHub and ‘crypto czar’ Valerie Szczepanik” — though he’s also certain that the SEC shouldn’t have to hold the guiding torch of regulation alone. The U.S.’s legislature, he says, needs to do its own part to effect the proper legislative changes that would allow regulations, and by proxy, the entities they regulate, to operate more organically within a more mature system.

“I think Congress can — and eventually will need to — do more to clarify how the federal securities laws apply to digital assets. The foundation of the securities laws dates back to the 1930s, long before anyone could have imagined the concept of a digital asset issued via the internet through the use of blockchain technology. This old legal framework simply wasn’t designed for the digital age, and as a result, it doesn’t provide the regulatory clarity that the crypto industry needs to move forward.”

So far, there have been very few benchmarks for moving regulation forward: the Howey Test, a metric to measure whether or not an asset is a security as defined by the Securities Act of 1933; the DAO Report, a report released by the SEC after the DAO hack in 2016; prior enforcement actions; and, most recently, the SEC’s Statement on Digital Asset Securities Issuance and Trading (something that Chervinsky said “reads like a comprehensive primer on the types of securities violations that the SEC wants to resolve in the industry”).

Much like the outdated Securities Act, Chervinsky finds that these various references for guidance are not robust enough to substantiate actual regulation and satisfy the industry’s need for clarity. And even though he thinks Congress should be bringing more to the table than it has already, the SEC should also be doing more to help the industry.

“The SEC can and should do a lot more than regulate by enforcement. The SEC could issue informal guidance explaining its position on the many outstanding questions facing the crypto industry, such as when a token transforms from a security to a non-security, or how a company can conduct an ICO outside U.S. borders without implicating the SEC’s jurisdiction. The SEC could also pursue official rulemaking to formalize its positions on digital assets. This would result in enforceable rules — like Regulation D for private placements or Regulation S for offshore securities issuances — that the crypto industry could rely on moving forward.”

He added:

“... Similarly the securities laws are unclear as to whether the SEC has jurisdiction over cryptocurrency exchanges and initial coin offerings located physically outside U.S. borders. Given that the SEC doesn’t appear likely to provide any additional clarity on these issues, the burden may fall to Congress to step in and take action.”

Heading Into a New Year, the Industry Has More Questions Than Answers

Other legal experts agree with Chervinsky that the SEC, in a way, has left investors hanging with its sluggish regulatory action that is punctuated with hard-hitting regulatory charges. Some have even said that the new Statement on Digital Asset Securities Issuance and Trading lays a minefield for the digital asset industry and those launching companies to curate it.

Less a minefield and more a labyrinth, Chervinsky believes that some of the SEC’s other guidance, like the clarification that ether, while sold as a security, has decentralized to the point of not being one, could construct a maze of confusion over what counts as fully decentralized — and how a token company is supposed to get there in the first place.

Chervinsky notes that “in July, the SEC suggested that a digital asset could start life as a security and then evolve into a non-security once it becomes ‘sufficiently decentralized,’ but the law doesn’t contemplate such a transformation.”

Even so, with its prosecution of ICOs, broker dealers, funds and now an exchange in EtherDelta, Chervinsky believes that the SEC has “made an example of at least one target in each of the key segments of the crypto industry.”

The only piece missing, he believes, are the traders — those who engage in “acts of market manipulation, including pump and dump schemes, wash trading, spoofing, and outright fraud.” He believes the SEC hasn’t gone after these actors because of insufficient market data but that they’ll be in the agency’s crosshairs soon enough. (If you read this and your heart skipped a beat, don’t worry; he’s talking about traders who actively commit market manipulation and fraud, not everyday, Dick and Jane traders).

With all the pieces in place, Chervinsky expects 2019 to be somewhat of an open season for the SEC for those who decide to shirk their regulatory responsibilities. But that doesn’t mean that every shot will be a killshot. With each successive enforcement, more questions will be opened and more avenues of interpretation traversed.

In Chervinsky’s opinion, resolution on these fronts will be a slow, painful march marked by a combination of legal battles and molasses-paced legislative drafting.

“The crypto industry won’t have a firm standard for what conduct is allowed and what’s illegal until Congress passes new legislation or the SEC’s theories are tested in court.”

Some of these standards are in the making, as the recent court action in California surrounding BlockVest suggests. As for the rest, the industry will have to hunker down and withstand the brunt of what’s become a slow, blow-after-blow exchange with an evolving regulatory landscape. But, so long as it can take note of where the bruising has set in, these blows should become less damaging (and less frequent) over time.

Is cryptocurrency becoming more mainstream? It could be if one of America’s most prominent game shows features an entire category devoted to it.

The November 29, 2018, episode of “Jeopardy!” — which has been on the air since 1964 — offered five unique questions centered around cryptocurrencies and their technology to test out its contestants’ knowledge on the subject: The results reveal that they did indeed know their fair share.

The “cryptocurrencies” category occurred in the game’s first round, with answers worth $200, $400, $600, $800 and $1,000 depending on their order and level of difficulty. The category was also among the final two to be tackled by the players, suggesting they may have felt a little less confident heading into it.

The first clue, selected by Phil Tompkins, a portable restroom service technician from Indiana, was a rather basic one: “An altcoin is any unit of cryptocurrency other than this original one.” Chris Williams, a consultant from New York, responded with the correct answer: “bitcoin.”

The contestants then moved to an entirely new category before Adriana Ciccone, a data scientist from San Francisco, jumped back to “cryptocurrencies” with less than a minute to go in the round. In true cryptocurrency fashion, the stakes suddenly got higher when the selected clue turned out to be a “daily double” — meaning she was able to risk any or all of her accumulated winnings on the result of that one answer.

Ciccone chose to risk $2,500 of her $5,200 pot, and the clue that followed read, “In 2018, this South American country launched the petro currency backed by oil reserves.” After just a moment’s thought, she responded with the correct answer of “What is Venezuela?”

Two more of remaining clues — both which were answered successfully — also focused on tokens, including one about Kik’s “Kin” token and the ill-fated “Coinye” token.

The $600 clue finally got technical: “Each transaction is a ‘block’ connected in these digital ledgers that enable cryptocurrencies to work.” (Okay.) Fortunately, Ciccone was able to respond with “What is a blockchain?”

This isn’t the first time “Jeopardy!” has tested players’ knowledge of digital assets. Back in April 2018, the show featured a clue in which “What is bitcoin?” was the correct response. The clue read, “In December 2017, one unit of this cryptocurrency was 15 times more than an ounce of gold.”

In early November 2018, “Jeopardy!” was renewed through 2023. This will bring its television run to nearly 60 years. The fact that such a long-running show would feature cryptocurrencies in such a prominent way, combined with the fact that the clues were all answered correctly by men and women from such different walks of life, suggests that digital assets are indeed venturing deeper into mainstream territory.

Vitalik Buterin left academia four years ago to pursue a career in crypto. Now, the Ethereum founder’s contributions to the industry (and the computer science field at large) have earned him an honorary Ph.D. — in the same year he might have eventually completed his undergrad degree.

In 2014, disenchanted with academics, Buterin accepted a Thiel Fellowship for his preliminary work on Ethereum and dropped out in his freshman year at the University of Waterloo to work on the smart contract platform.

Today, the University of Basel's Faculty of Business and Economics has awarded him an honorary doctorate. The distinction was given at the Dies Academicus celebration, an annual event that commemorates the opening of the university.

Dean of the Faculty of Business and Economics, University of Basel, Prof. Dr. Aleksander Berentsen calls Buterin's blockchain innovations "game-changing," adding that he has "blazed a trail for science and industry to follow and work together."

"I’m honored to have received an honorary doctorate from the University of Basel the oldest university in Switzerland. Switzerland is well known for its innovative blockchain research,” Buterin stated.

Buterin first introduced his concept for the groundbreaking Ethereum in a white paper titled "A Next-Generation Smart Contract and Decentralized Application Platform" in 2013, wherein he proposed the development of a new platform with a more flexible scripting language than Bitcoin for building applications on the blockchain. Coinciding with the awarding of its creator’s honorary degree, this month marks the fifth anniversary since the paper was published.

Before his work on Ethereum, Buterin also co-founded Bitcoin Magazine alongside Mihai Alisie, serving as the site’s lead writer. He also held an editorial board position at Ledger, a scholarly cryptocurrency and blockchain journal.

Buterin has continued to contribute to the application of blockchain technoloies through essays on topics such as consensus protocols, Plasma and Casper.

Buterin was born to Russian parents on January 31, 1994, in the ancient city of Kolomna in Moscow, before he emigrated to Canada where he was able to explore and develop his love for math, programming and economics.

He first learned about Bitcoin from his father when he was 17. After travelling the world in 2013 to interacting with other developers, especially those working on Mastercoin, he published a whitepaper that proposed Ethereum the following year. From July 22 to August 30, 2014, Ethereum raised $15.5 million in an initial coin offering and went on to launch on July 30, 2015.

'œThe business model for surveillance, which can be used for ill, is advertising.'

'" Nathaniel Whittemore

Interview location: Skype

Interview date: Wednesday 28th Nov, 2018

Company: NLW & CO

Role: Lead

The crypto industry is blessed with many smart thinkers and content producers. Across Twitter, Medium, news sites and blogs there is a regular supply of thought pieces and analysis where contributors speculate on the future of the industry.

There are often opposing views which can stretch to disagreements and impassioned debates. Keeping up with all this content can be difficult, which is why Nathaniel Whittemore's Long Reads Sunday has become an essential follow for anyone in the industry.

Nathaniel carefully curates all the news, articles and discussions into a super thread of threads on Twitter where he carefully knits together the narratives from the week into a coherent story.

Nathaniel came on the podcast this week to discuss Long Reads Sunday and other key narratives, from the problems with crypto marketing to how technology is advancing faster than society can adapt.

Popular cryptocurrency exchange Coinbase is launching Zcash (ZEC) trading on its professional trading platform Coinbase Pro. The announcement made via Coinbase’s blog page states that inbound transfers of the currency will begin at 10 p.m. PST on Thursday, November 29, 2018, though early deposits have already begun.

The blog reads, “Once sufficient liquidity is established, trading on the ZEC/USDC order book will start. ZEC trading will initially be accessible for Coinbase Pro users in the U.S. (excluding New York), the U.K., the European Union, Canada, Singapore and Australia. Additional jurisdictions may be added later.”

At press time, ZEC is not yet available on Coinbase.com or on the company’s mobile apps. The blog says a separate announcement will be made once ZEC is active on these platforms.

Zcash is a cryptocurrency that offers users additional privacy. The asset comes in two forms: shielded and transparent, with the former encrypting transaction information to ensure it remains unseen by third parties. Coinbase Pro says it will support deposits from both the shielded and transparent forms of ZEC, though only withdrawals to transparent addresses will be permitted.

“In the future, we’ll explore support for withdrawals to shielded addresses in locations where it complies with local laws,” Coinbase’s blog states.

The launch is set to occur in four stages. The first,“transfer-only” stage went live at 10 a.m. PST on Thursday, November 29, in which customers could begin depositing ZEC into their Coinbase Pro accounts. Posting limit orders can occur via the second, “post-only” stage, which will occur at 10 p.m. on the same date.

This stage will last for approximately one minute and will be followed by a “limit-only” stage, where limit orders will begin matching. Customers will have to wait an additional 10 minutes before the fourth stage, full trading, occurs. From there, customers will be able to submit market orders and enjoy full trading services through Coinbase Pro including limit, market and stop orders for ZEC.

Coinbase unveiled a new listing process last September with the goal of listing all assets that meet the company’s standards and comply with local laws as quickly as possible. As the cryptocurrency market contains thousands of unique assets, each currency listed undergoes a thorough inspection and usually only satisfies listing requests in a “jurisdiction-by-jurisdiction” manner, meaning certain coins may only be available to customers in specific regions for limited periods of time.

Since implementing its new process, Coinbase has gone on to list several new assets on Coinbase Pro including Basic Attention Token (BAT) in early November and ZRX, the token of the 0x protocol in October. Coinbase had been promising to potentially add these coins and others like it since March of 2018, saying that it was looking into placing several Ethereum-based tokens on all its trading platform in the “coming months.”

This week realized a big gain as bitcoin enjoyed a 25% rally from its local bottom before topping out around $4,400. Support currently appears to be established in the mid-$3,000s as the market remains indecisive over its next move:

Figure 1: BTC-USD, Daily Candles, Current Support Level

Figure 1 shows the relevance of the current support level as it represents a previous support level that was never properly retested during last year’s parabolic bull market. At the moment, we are currently seeing some resistance around the macro, 78% Fibonacci retracement of the parabolic run-up. To date, bitcoin has realized a whopping 82% devaluation from its all-time high to the current low in the mid $3,500s.

If our current support holds, we should expect to see a battle over the 78% retracement values where, if the overhanging retracement level breaks, we will likely encounter another level of resistance in the $5,000 region. But, for now, the market needs to tackle the 78% Fibonacci before worrying about the overhanging resistance levels.

On the lower time frames, we can see bitcoin is finding nice support on its 23% retracement which also happens to be the previous high:

The lower time frames are consolidating on top of the previous high and just below the macro 78% retracement. Off the $3,500 low, we saw a decently strong rally with high volume and wide spread indicating strength on the demand side. The ability to hold this current level is a temporary bullish sign that the bears may be taking profit and eager bulls are jumping in to ride a potential rally upward.

At the time of this article, bitcoin is up over 20% from its local low and the bulls appear to be taking a stab at the market following the previous brutal 60% drop. For now, the market is in a kind of sit-and-wait zone while we sit and observe how the market reacts to its newfound support and resistance levels.

If we manage to break through current support, we can expect to see a retest of the mid $3,500s. If that level doesn’t hold, we can then expect to see a drop down to the low $3,000 values:

Figure 3: BTC-USD, Daily Candles, Lower Support Levels

The low $3,000s represent the previously established support level during last year’s bull market and we have yet to retest the support zone. As I mentioned, the current price level is in a wait-and-see level and we need to see how the current support and resistance level holds over the next few days.

Summary:

After bottoming out around $3,500, bitcoin enjoyed a near 25% rally where it is currently testing the resistance of its macro 78% retracement.

On lower time frames, bitcoin is seeing a decent sign of strength as the demand appears to be relatively high and the candle spread is wide.

The current price level calls for observation while we wait and see how the current support and resistance levels are received over the next few days.

Trading and investing in digital assets like bitcoin and ether is highly speculative and comes with many risks. This analysis is for informational purposes and should not be considered investment advice. Statements and financial information on Bitcoin Magazine and BTC Media related sites do not necessarily reflect the opinion of BTC Media and should not be construed as an endorsement or recommendation to buy, sell or hold. Past performance is not necessarily indicative of future results.

A new development has arisen in the U.S. Securities and Exchange Commission’s (SEC) efforts to regulate ICOs: a District Judge has turned back a request for an injunction.

According to a recent legal briefing, San Diego District Judge Gonzalo Curiel has been presiding over a case between the SEC and the startup company Blockvest. On November 27, 2018, although Judge Curiel had previously “granted the SEC’s ex parte request for a temporary restraining order and froze the assets involved in the ICO,” he has now stated that the SEC couldn’t demonstrate that buyers of Blockvest’s ICO expected to receive a profit.

The SEC’s regulations regarding ICOs are a tricky and largely unresolved legal area, but this case and others have explicitly cited one 1946 court case: SEC vs. W.J. Howey Co. This case first codified into law that certain assets can be considered securities, and become subject to securities regulations, based on the way that sellers and customers handle them.

One of the critical criteria for an offering such as an ICO to become a security under the Howey statute is for customers to demonstrate an expectation that they will eventually make more money from the purchase. According to Curiel’s recent comments, customers of the Blockvest ICO were under no such illusion.

Curiel’s comments by themselves do not constitute a legal verdict, and the case is by no means sealed. The briefing went on to state that former representatives of the SEC believe that this case “sends a message to the agency that courts are paying close attention to the question of whether digital tokens fit the legal definition of a security.”

In other words, this is a concrete example of the court system showing a willingness to treat ICOs as if they are not necessarily tied to securities regulations. Legal commentators on the briefing included the sentiment that “it was obvious that the judge had studied the facts and the applicable precedent” as it applied to the case.

For now, Judge Curiel’s reversal will mean that Blockvest’s assets are no longer tied up by the initial freeze order that the SEC was granted, and it will be better equipped to mount a defense should the SEC bring more charges against them.

“It is an extraordinary challenge for defendants facing freeze orders and restraining orders obtained ex parte by the government,” said Stanley Morris, representing the defendants. He added that “our clients are now free to defend themselves through trial and look forward to being vindicated.”

Jared Rice Sr., CEO of the Dallas-based bank AriseBank, was arrested by the Federal Bureau of Investigation (FBI) on Wednesday, November 28, 2018, and charged with six counts of securities fraud and wire fraud. Rice is accused of scamming investors out of more than $4 million through a cryptocurrency scam that promised federally insured accounts and brand-name credit cards.

Earlier this year, the U.S. Securities and Exchange Commission’s (SEC’s) regional office in Fort Worth, Texas, received an emergency court order to stop AriseBank’s initial coin offering (ICO) for the cryptocurrency AriseCoin, which Rice falsely claimed had raised a whopping $600 million. According to the court filing, Rice reportedly lied to investors, saying that the bank — which he called the “first decentralized banking platform” — could offer customers FDIC-insured accounts, as well as traditional banking services such as Visa-brand credit and debit cards.

Erin Nealy Cox — the U.S. District Attorney for the Northern District of Texas — states that AriseBank was not FDIC insured, nor did it have the authority to conduct banking operations in Texas. It also did not have an official partnership with Visa.

Rice spoke of AriseBank’s allegedly non-existent benefits online and through press releases while spending investor funds on hotel stays, clothing, meals, Uber rides, a family law attorney and guardian ad litem. Prosecutors also accused Rice of spending the funds on his girlfriend.

Overall, Rice raised roughly $4.25 million from investors who used fiat currency, bitcoin, ether and litecoin funds between the months of June 2017 and January 2018 to buy into AriseCoin.

All the while, Rice ultimately failed to disclose to investors that he had previously pled guilty to state felony charges of tampering with government records for forging a Texas Secretary of State Incorporation document and for stealing funds through a prior internet business scam. Rice is presently on probation for these offenses.

Cox commented, “My office is committed to enforcing the rule of law in the cryptocurrency space. The Northern District of Texas will not tolerate this sort of flagrant deception — online or off.”

Rice faces up to 120 years in prison if convicted. Assistant U.S. attorneys Mary Walters and Sid Mody are prosecuting the case, but a trial date has not been set.

One similar case involves Brooklyn-based businessman Maksim Zaslavskiy, who recently pled guilty in a New York federal court to conspiracy to commit securities fraud in connection with the ICOs REcoin Group Foundation, LLC (REcoin) and DRC World Inc., also known as Diamond Reserve Club (Diamond).

Zaslavskiy touted the ICOs as being backed by real estate and diamonds respectively, when, in fact, he had purchased neither, and the certificates he sent to his investors were not backed by the blockchain. He’s currently facing up to five years in prison.